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Hugh Pickens writes "MSNBC reports that in 1969, Walter T. Davey, an aeronautical engineer at North American Rockwell, discovered he was being overpaid by roughly 2 cents an hour, or one-third of 1 percent of his pay. Davey submitted the discovery to his superiors and suggested a simple fix. 'It was so simple to correct,' said Davey, a 79-year-old retired Air Force colonel, 'just change a few digits in the coding software.' The Project on Government Oversight, which reviewed Davey's findings last year, estimated the change could save taxpayers $270 million a year. Multiply by 40 years — the length of time since Davey made his discovery — and the figure grows to an astounding $10.8 billion. Legislators ignored Davey's letters, federal auditors deferred to Congress, and lobbyists 'descended on it and tore it into a piece of Swiss cheese' but legislators aren't eager to challenge the powerful defense lobby about a figure that's a relative pittance in the overall defense budget — even if it exceeds $100 million annually. 'A lot of people have taken advantage of the system to reap as much in taxpayer dollars as possible,' says Scott Amey, general counsel for the Project on Government Oversight. 'But when you're going up against the contractor lobby — whether you're an individual across the country or a public interest group or a government employee — it's a tough road.'"

I don't exactly get what your argument is? That government workers should somehow be exempt from the system? They're employees, just like everybody else, and deserve to be treated equally under the law.

For instance, in addition to his presidential salary, Barack Obama makes quite a bit of money off of his books, negating any potential tax credits that he might have otherwise received to pay for expenses relating to the care of his children.

Check out these graphs. They show how the consumer price index has been relatively the same from 1774 to 1900, and how from 1900 it has skyrocketed. What changed? We abandoned the stability of precious metals, and now we have paper currency which has devalued from 1 dollar in 1910 to about 4 cents today.

It's worse than that. If you use the CPI calculation that was in place the day Ronald Reagan took office, the current rate of inflation is around double what they're reporting today, well into the double digits.

And to fend of the partisan accusations, Bill Clinton modified the calculation again making it even worse.

When Reagan and Volker decided to "break the back of inflation", they meant wage inflation. That's why wages have been stagnant for so long. But don't worry, inflation in every form is right a

His salary was equivalent to about $70,000 today, which isn't too shabby (though hardly "overpaid"). Also, the article mentioned that there was a financial incentive for discovering ways to save money. Davey admitted that he was hoping to get some award from his discovery.

When accounting for inflation, using this inflation calculator [westegg.com], $6.00 an hour in 1969 is just over $33 an hour in 2007 money. That works out to be $68k a year, based on the articles 2080 hours per year figure.

I would say this is much significant. Two cents an hour per government employee is less than a cent an hour for each taxpayer. Looking at the final figure he saved each taxpayer one dollar a year. Not that much.

But it is still a cool story, though. It should be a pleasant feeling to be responsible for the saving of $270M a year. And certainly something to brag about.

However, did he save the taxpayers $270M, or did he cost the employees $270M? And are his fellow workers happy about this?

Arnold Schwarzenegger's salary as governor: $206,500 - which he waived cause he already earned over 230 mil. (that is without these 117 T3-millions) over his 30 years in the movies.Indicating that he himself felt that he was being overpaid already.

Same guy, same role, 400 times the original pay.Sure, sequels made a lot more money but still - $147,000,000 for a year's work? That is almost $17000 per hour - including being paid for sleeping, eating etc.

Singers:Britney Spears makes about $737,000 per month. [cnn.com] That comes out to about $1024 per hour. (Is that a kilobuck or megabuck?)Again - getting paid for sleeping.

HOW is that not overpaid?

And let us not even start with football, baseball, soccer and other enthusiasts who are little more than overpaid manual labor.Getting millions for kicking a ball around? Fuck that! That is not work.That is why you never hear about a "job" or "work" or "assignment" of basketball.What were the words they use? Aaah.. yes!They PLAY a GAME.

The only group of professional actors/entertainers (IMHO) who are not being overpaid (and are actually underpaid) are porn actors and actresses.Anyone who does not agree - you try "performing" in front of cameras for hours and then upload that online for all to see.

It's not overpaid for the simple fact someone was willing to pay that much for it. It may not feel "fair" that these examples you cite get paid obscene amounts of money for singing, kicking a ball, or sleeping; but, strictly speaking, they are not overpaid.

Overpaid is when one is being paid more than the agreed upon amount. If we've agreed that you will pay me $6.00/hour for my work, and through an accounting error you pay me $6.02, then I've been overpaid. Arnold agreed to the wages he was paid, throu

It's not overpaid because the employer and employee agreed upon a set salary. It doesn't matter if it is $10 or $10 million.

By that same logic one can't be underpaid either. Those kids making Nikes for penny an hour? Fuck 'em! They accepted the "set salary".

but I'd be willing to bet they work 100x harder than you imagine.

And I'd be willing to bet that Arnold was working the same or less (hard) on the third movie as he did on the first.And even if he did work 100x harder - $177 million he got for the third movie is about 2300 times more than what he got for the first.

So... he was still overpaid. About 23 times more.

BTW... at the same time, those "stars" are being treated like royalty.Aside fro

If someone like the US Government overpays you and then it's discovered years later, then you'll likely have to pay it back. And they are so much bigger than you that you will pay them it if you have it, or even if you don't. So being overpaid means you are obligated to save it for them. Except since it's your's you can be sued for it, or lose it in a bankruptcy. If you have gone to the trouble of calculating the government's overpay rate, then saving it in the form of T-Bills, and then you go bankrupt,

My parents bought their first apartment for 6000 pounds back in 1966. Today, the same property is worth around 200,000 pounds. Salaries followed a similar path. $6/hour then would be like $20/hour now.

Your parents did a very good business. After correcting for inflation [measuringworth.org], those 6000 pounds became 80000, which means your parents got 6.5% / year interest in real value plus free rent for over 40 years.

My parents bought their first apartment for 6000 pounds back in 1966. Today, the same property is worth around 200,000 pounds. Salaries followed a similar path. $6/hour then would be like $20/hour now.

My parents bought their first apartment for 6000 pounds back in 1966. Today, the same property is worth around 200,000 pounds. Salaries followed a similar path. $6/hour then would be like $20/hour now.

Be careful of these numbers. The range of goods and services available today are different, and this makes comparisons hard to evaluate. In 1969 my father earned about $5/hour. To live in the same house today with the same living standard, with his kids attending the same sort of schools and going to the same sort of university, he would need to earn around $100. This feels about right because his grandchild, in the same kind of job (but where pay rates have increased in real terms) earns nearer to $200/hour. This is because overall living standards have changed upwards. So my feeling is that $120/hour is nearer the mark.

We're not really comparing the cost of goods, but the devaluation of the dollar. i.e. A dollar in 1910 is equivalent to just 4 cents today; it's lost 96% of its purchasing power. The excess printing of money has led paper to lose value rapidly. (Whereas an ounce of gold both then, and now, could buy you a brand-new suit. Gold is relatively stable.)

Anyway I came-up with $6 in 1969 is equivalent to $39 today, which is just shy of what I get as an engineer.

We're not really comparing the cost of goods, but the devaluation of the dollar. i.e. A dollar in 1910 is equivalent to just 4 cents today.

Ah, yes, but it's not that simple.

4 cents placed in a plain-old savings account would actually alsoequal [measuringworth.com] a dollar today. If you don't want your money to lose value, put it in the bank, and forget about it -- savings rates appear to have kept up with dollar's declining purchasing power.

Invested in bonds or an index fund, that $0.04 would now be worth $9. A 9x return on any investment (adjusted for inflation) is considered to be phenomenal.

Well, US minimum wage was RAISED to $1.30 in February 1969, so $6.00 p/h (4.61 times that minimum wage) would look like about $30.20 p/h (4.61 times current minimum wage) now. So, yes, that was pretty fair money at that point in time.

Its the sad truth that the military will never bring back a budget that did not use up all its money...as this would show that it does not in fact need to keep being given so much, and could ina stupid way of thinking , not get enough for the next year etc....when it might go over the budget...etc..etc...

The dolts who plan the military are not accountants, but they are good at getting what they want....this is exactly why you do not want to keep giving them new projects, they always ask for more..

What you just described is true of ALL levels of government, whether it's the schools, or the local planning commission, or whatever. They spend every penny they are given, rather than return excess, because they don't want next year's budget to be cut.

Explicitly allowing military contractors to overcharge the taxpayer to deliver broken systems on no-bid contracts is the heart of True Capitalism(tm) and A-OK.

Making it easier for employees to enter into unions so they can negotiate better pay/benefits within the constraints of market competition is Pure Socialism(tm) and Must Be Stopped at all costs lest the USA degenerate into a communist backwater like Sweden.

Er, you mean force workers into Unions to control them using a open ballot system.
Hmmmm, billions since 1969 vs trillions in his first 100 days.
Defense vs. Wealth redistribution....
Hmmm..... Me thinks people should be skeptical of your type...

>>>Too bad [Bush] had to inherit the problems created under the 8 years of [Clinton].

Fixed that for ya. Bush inherited not only a dot-com crash from Clinton, but also the headache of Saddam and Bin Laden. So as long as you're going to be giving Obama a "free pass" and blame today's problems on Bush, then we should give Bush a free pass and blame those problems on Clinton.

By the way I hate them all. I haven't liked any of our presidents since the Ronald Reagan/Bush Senior combo. Not that they we

Perhaps Clinton would have had more time in his second term to launch even more Tomahawk missiles at bin Laden if he wasn't busy being deposed about his blow jobs. I seem to recall him being criticized about launching attacks at the terrorist training camps as though it were a "wag-the-dog" distraction from the country's real priority: the president's philandering.

The implication that Clinton was drummed around because he was sleeping around is getting really old. The big issue wasn't the affair. The issue was that the POTUS committed perjury, a felony, in a case in which giving the correct testimony would have been relevant.

Bush inherited not only a dot-com crash from Clinton, but also the headache of Saddam and Bin Laden.....I haven't liked any of our presidents since the Ronald Reagan/Bush Senior combo.

For someone who likes Reagan and hates Clinton you don't seem to know much about them. It was Reagan who allied himself with Saddam Hussein and gave him money and weapons. From wikipedia [wikipedia.org]:

The Reagan administration gave Saddam roughly $40 billion in aid in the 1980s to fight Iran, nearly all of it on credit. The U.S. also sent billions of dollars to Saddam to keep him from forming a strong alliance with the Soviets. Saddam's Iraq became "the third-largest recipient of US assistance".

Reagan's support for the Mujahadeen also played a role [wikipedia.org] in giving Bin Laden more power:

Alhough there is no evidence that the CIA directly supported the Taliban or Al Qaeda, some basis for military support of the Taliban was provided when, in the early 1980s, the CIA and the ISI (Pakistan's Interservices Intelligence Agency) provided arms to Afghans resisting the Soviet invasion of Afghanistan, and the ISI assisted the process of gathering radical Muslims from around the world to fight against the Soviets. Osama Bin Laden was one of the key players in organizing training camps for the foreign Muslim volunteers. The U.S. poured funds and arms into Afghanistan, and "by 1987, 65,000 tons of U.S.-made weapons and ammunition a year were entering the war.

So before you start blaming Clinton for everything, you might want to read up a bit on your history.

Actually, if you look at the pure numbers, we killed about five times more people with our Iraq/Afghan bombings than all the 9/11 deaths put together. The best course to follow, in order to save lives, would have been to do nothing. Yes shore-up the border defenses so no more terrorists can sneak through, but that's it.

And you also have to put things into perspective. 3000 Americans died in terrorist attacks over the last decade. But during that same timespan 24 million people died in the U.S.; 1 millio

In all likelihood, it will be our own military contractors, too politically powerful to reign in, who will eventually destroy our military effectiveness. We can spend as much as we like(and we already do) but, so long as our spending is a mixture of "what Raytheon feels like producing" and "the ultimate weapon against the forces of the evil empire rolling across Europe in alternate-1979" it won't do nearly as much good as we would like.

I guess you've never seen a Life Cycle Management Framework before. How else would you deal with an item that takes years to design before production and could be in use for decades? It requires a HUGE amount of paperwork to track decisions and resources.

Exactly. The entire reason for the incredible amount of paperwork in every phase of a federal acquisition is to ensure that every decision has a person's name attached to it. If ten years later, an investigation determines that there was some impropriet

If you work anywhere near the military it isn't near here... I don't know how many stories I've heard where contractors were forced to use FCS to fast-track equipment to the soldiers in Iraq because the standard military procurement process would have had the equipment to the soldiers in Iraq after we finish the conflict in Afghanistan. Of course, the press runs that as wasteful spending of the FCS money.

Uhh, it IS wasteful spending of the FCS money, because what the military should actually be doing is streamlining the procurement process or implementing a fast-track procurement process for combat operations.

This issue could be considered more of a scapegoat for the horrendous spending and poor budget management of the many poorly managed defense contracts over the last 40 years.
Trust me, 10 Billion pales in comparison to what has been directly wasted. Also, 10 Billion dollars may seem a lot, but given its based around 40 years it cuts it down quite a bit.

When your accountability will not result in demotion, being fired, or such, what do they expect?

This Pentagon example is yet another reason why everyone should be running and screaming away from the current Administration and Congress goal of even larger Federal Government.

Why not harp more on the Congressional mandated waste in the Pentagon? Like how bases are kept open and programs going just to keep votes rolling in? I am quite sure it amounts to more than a decimal error

Having worked in both for the government and for a private business I don't think the government does any worse at project management and accountability than any other company.

The Government just has to publically disclose all of its screw ups (eventually) and they become fodder for political campaigns, thus we are exposed to them over an over. Unlike private companies who tend to cover the tracks a bit more until it is totally too late (Enron and GM come to mind). But as far as sheer competence goes I d

Of all the expenditures the government wastes money on the one I care least about is paying those who actually defend our country. Not only that but it's one of the few powers explicitly granted to the federal government and one of the few that needs to be federalized.

While, as you say, defense expenditures are on a sound constitutional footing, that doesn't absolve them from the need to be effective.

Of particular note, given your formulation "paying those who actually defend our country" is the fact that the defense budget, while gigantic, is hardly infinite. If, because of political pressure or poor oversight, more money is going to contractors, less is going to "those who actually defend our country". Further, if oversight is poor, the quality of equipment they are

Contrary to popular belief, the main purpose of most government spending is simply to create new money. This allows subsequent credit expansion and "growth".

The whole concept of value for money or saving taxes is completely wrong in this regard and simply doesn't fit with our monetary system. Which might help explain why nobody is keen to do anything about over spends.

"No, Peggy, you don't understand! They're OVERPAYING ME! I'm stealing from the government, I tell you what! And I can't get them to stop! It keeps me up at night, I tell you what!"

Forty years later: A Colonel shows up at Hank's door.

- "Mr Hill? We've responded to your letter, and it turns out you were right. We have been overpaying you all this time."
- (sighs.) "I always knew this day would come." (hold out his wrists) "I'll come along quietly."
- "No, no, Mr. Hill! You don't understand. We're implementing the fix you suggested. It'll save the government millions of dollars a year. We just wanted to thank you!"
- "Oh. Huh. Well, thank you sir. But in that case, can I at least give you back the money?"
- "I beg your pardon?"
- "Wait here." (Hank goes to his garage, wheels out a 50-gal drum on a hand truck.) "I've been putting the extra pennies in here since 1969, I tell you what. And now I'm ready to return it."
- (smiles) "No, you go ahead and keep that. We're cool." (leaves)
- "Alright! I can go to college now!"
- "Bobby, go to your room!"
- "I'm 45 years old! You can't make me go to my room!"
- "Now, mister!"
- "Aw.."

This guy doesn't work directly for the government. I'll assume its cost plus work that he's doing, so Rockwell charges his hours directly back to the government. However, they don't charge his hourly rate, they charge Rockwells hourly rate for his job position, which is more than his personal calculated take home (or Rockwell would be making no money on his work). So the real losers here would seemingly be Rockwell as they have to pay him out of their pool of money and the $0.02/hr would come out of their profits.

Employees don't have individual rates. It typically goes by job title/position, ie: assoc engineer time is worth $120/hr, senior is worth $200/hr (purely made up numbers, not sure on the actual rate or title names), etc.

If its not cost plus then this is even more confusing as Rockwell is working to a contract dollar value and any extra pay again would come out of their profits. The accounting doesn't make a whole lot of sense to me. Unless this is some special case in which the numbers of people it would affect would seem pretty small.

The second page of the article talks about the 'bug' - Rockwell figures salaries based on 2080 hours/yr. while the Federal gov't uses 2087. I see how your point can be valid, but it's possible that Rockwell gets a price on the contract, say $50M; but then instead of getting a $50M check, the gov't just uses that to set up the payroll figures. But by having different hours/yr, Rockwell, too, gets more than $50M over the life of the project. With multi-year projects, and the fact that they almost never get f

I dunno. Still doesn't seem to make much sense as work is charged back by the hour, not by the year. Actually by the 6 minute. Nobody charges full time back to the government so the hour/yr makes no sense. The accounting rules are very specific as to what you can charge back and what you can't. For example, your weekly staff meetings go to overhead charge numbers, not back to the customer/government. Now I'm talking today, not 30 years ago which is when this apparently is from. A lot has changed since then

This guy doesn't work directly for the government. I'll assume its cost plus work that he's doing, so Rockwell charges his hours directly back to the government. However, they don't charge his hourly rate, they charge Rockwells hourly rate for his job position, which is more than his personal calculated take home (or Rockwell would be making no money on his work). So the real losers here would seemingly be Rockwell as they have to pay him out of their pool of money and the $0.02/hr would come out of their profits.

If its not cost plus then this is even more confusing as Rockwell is working to a contract dollar value and any extra pay again would come out of their profits. The accounting doesn't make a whole lot of sense to me. Unless this is some special case in which the numbers of people it would affect would seem pretty small.

It really comes down to what a contractor can charge the government for on a contract; not what the individual gets paid. The contractor can calculate an hourly rate for each job category (using 2080 hours/year) and then every hour anyone in that category bills gets an associated cost charge to the project. The contractor then gets paid for those costs.

It's a way to let a contract where you don't know what it will take to complete the job. The government takes the cost risk so that contractors don't bid

The American taxpayers' dollars are the single most fantastic pile of loot on the planet. It is so big that pilfering it is a full-time job for millions of people. It's like a horde of scavengers around a perpetually gushing cornucopia.

Defense contractors are not even the big time scavengers here. No, the real T-Rexes in this game are the Federal employee unions, believe it or not. A defense contract comes and goes, and is generally audited. A union benefit is forever.

Disclaimer: I have nothing personally against unions, contractors or T-Rexes.

We blame the lobbists for their stance, and rightly so.
We also have to blame the politicians, congress etc...if they actually stood for what is right and is common sense the lobbyists view wouldn't matter.
But the politician is only about power for himself and getting re-elected. Since the lobbyist serves his personal agenda well, the lobbyist get a lot power from it simply by the politicians selfish motivations.
So the politicians are equally to blame. They don't care about 100 million dollars that i

When it's not your money and you don't have to fight for every penny by convincing customers not to purchase the alternative (no alternative to taxes), then you have little incentive to curtail waste. That our government pads all numbers with nine zeros is very predictable given the incentives.

Military contractors are not natural entities. They have evolved over the decades since WWI to be specialized in getting government military contracts, and away from actually producing at the lowest cost for the highest profit.

There's a joke about $700 hammers. But I've worked for some military contractors, and it's no joke. They're not so much overcharging the Pentagon, as they're probably just trying to recoup their costs. It might actually cost them $650 to produce that hammer. Seriously. And it's not just US military contractors. I've also worked for a couple non-US firms that were just as bad.

You analogy misses a point. By Throwing away the $50.00 notes I am not getting any goods/services from it, so there is no value in doing such an activity. Also unlike a government my money isn't directly funded by taxes so the more money moving around doesn't effect how much I personally get paid. But for the Pentagon does, So the more money moves the more they get back. Governments work more on Macro-Echonomics individuals work in Micro-echnomics.

You laugh (derisively), but GP more or less describes "leverage", the excesses of which ended up necessitating the bailout.

There's nothing particularly wrong with creating credit through leverage (more credit creates more growth opportunities), as long as your risks can be managed properly. And if we're a society that's unwilling to tolerate capital-d Depressions now and then along with our growth, we have to accept a tight level of preventative regulation in our financial sector. Finance and governmen

If the extra XX billion had not been spent overpaying military workers, those billions could have been kept by the original taxpayers who would have spent it on their own personal projects - like maybe buying food for their kids.

Even if it was backed by Gold, What makes gold so valuable, it is just a shiny rock. If you are going to start talking about the rarity of the rock. When why not link our currency to say something else rare, Say old 1920's comic books. Money and Value is a human invention not a natural one.

For the first year or two of a policy 'mistake' like this, contractors make extra money. After that the increase in profitability is taken into account on the next bid. So at most there was a temporary extra expenditure four decades ago.

If the rates were changed today, the market reaction would be almost instant. Contractors would insist on the old terms for existing contracts, and increase the rates for new contracts. And charge a little extra to compensate for the new risk of additional changes. (If